Tata Global Beverages Ltd's Q3FY19 consolidated net profit declines 42.3% yoy to Rs108.9cr : Misses Estimates

The company’s consolidated revenue stood at Rs1,912.6cr, up 10.5% yoy and 8.6% qoq.

Feb 05, 2019 02:02 IST India Infoline Research Team

Tata Global Beverages Ltd Q3FY19

Consolidated Results Q3FY19: (Rs. in cr)

Q3FY19 YoY (%)
Revenue 1,912.6 10.5
EBITDA 196.2 [16.5]
EBITDA Margin (%) 10.3 [333]
Net Profit (adjusted) 108.9 [42.3]
***EBITDA margin change is bps
Tata Global Beverages reported mixed set of numbers for the quarter, largely below estimates. Consolidated revenue for the quarter grew by 10.5% yoy to Rs1,912.6cr, broadly in-line with estimates. Gross margin for the quarter contracted by 166bps yoy. Gross margin contraction and higher other expenses led to EBITDA decline of 16.5% yoy to Rs196.2cr, ~12% lower than the estimate. Thus, EBITDA margin contracted by 333bps yoy to 10.3%. Further, associates and JVs reported loss of Rs12.4cr. Thus, PAT for the quarter declined by 42.3% to 108.9cr, ~32% lower than estimate.
  • Revenue from the branded segment grew by 10.9% yoy. Coffee segment reported strong revenue growth of 28.8% yoy; however, it reported 30.2% yoy decline in EBIT. Tea segment’s revenue was muted on yoy basis and reported a growth of 7.6%; EBIT for the segment declined 13% yoy.
  • Unbranded segment reported revenue growth of 5.2% yoy, however, EBIT reported 1% yoy decline.
  • Raw material cost and other expenses as percent of net sales were up by 166bps and 209bps yoy respectively.
  • Advertisement cost for the quarter was up by 80bps yoy to 8.1%.
  • Loss from associates and JVs stood at Rs12.4cr.
  • On the standalone basis, the company’s revenue was up by 4.9% yoy to Rs889.7cr. However, EBITDA and PAT were down by 23.2% and 57%, respectively. EBITDA margin contracted by 469bps yoy to 11.6%.
Concall highlights: 
  • The company would also be focusing on premiumisation for growth in India tea.
  • TGBL’s current distribution reach in the India tea market stands at 1.9-2m outlets.
  • Gross margin in the India tea business contracted by 237bps yoy, owing to input cost inflation. To mitigate the same, company has selectively taken price increases in some its (tea) brands in the India tea business. 
  • Eight O’Clock witnessed higher advertising spends; management is hopeful that these actions would result in market share gains in US coffee.
  • The Nourishco business largely consists of Tata Gluco Plus – a value play in the energy drink market. The product requires bottling plants to be closer to the end-consumer. The product is available in many states, but is not yet a pan-national product.
  • The international tea business has delivered a strong performance, with EBITDA margin improving by 265bps yoy aided by 6% yoy constant currency growth in the UK tea business. We believe that EBITDA margin in the international tea business can improve further, owing to restructuring steps undertaken by the management.
Segmental performance: 

India tea
  • India tea business grew 7%/5% in volume/value terms.
  • Green tea recorded a 7%/14% growth in volume/value terms.
  • Higher commodity costs during the quarter impacted gross margins.
International tea
  • UK sales grew 6% in constant currency terms, largely driven by volumes.
  • The company gained market share of 140bps/30bps in volume/value terms, driven by higher advertising and promotion spends.
  • Benign commodity costs further aided margin expansion during the quarter.
  • US tea grew 3%, driven by growth in Good Earth and Empirical.
  • The company launched Tetley Super teas in Canada.
Tata Coffee
  • Lower realisations in pepper and robusta coffee coupled with competitive pressures in the soluble coffee business resulted in flat sales.
  • The freeze dried instant coffee plant in Vietnam is expected to be commissioned in 4QFY19.


Technical View:

Tata Global Beverages Ltd is currently trading at Rs. 184.05, down by 1.8 points or 0.97% from its previous closing of Rs. 185.85 on the BSE.
The scrip opened at Rs. 185 and has touched a high and low of Rs. 188.55 and Rs. 178 respectively. So far 32,51,100 (NSE+BSE) shares were traded on the counter. The stock is currently trading above its 200 DMA.

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